Office development scarce along Toronto's new LRT route

The tunnel-boring machines have passed beneath this midtown Toronto strip, with stations now to be built and tracks to be laid for the $5.3-billion Eglinton Crosstown light-rail transit line, slated to open in 2021.

On the surface, at least, development has boomed as expected, with Eglinton and Redpath avenues particularly active: Four more condominium towers in various states rise from the din and dust within a block.

Yet the biggest story may be what’s not happening.

Toronto’s planning department lists as “active” 129 developments within 500 metres of the 19-kilometre transit corridor since Jan. 1, 2008, roughly when the Eglinton Crosstown became a certainty. Listed are more than 25,000 condo units in projects proposed, in the pipeline or recently built along what the province boasts is the largest transit investment on the continent.

But the boom includes almost no new office space. One proposal that includes some – a redevelopment at 90 Eglinton Ave. W. approved at city council last week – would replace just half the office component of the current building.

The intersection at Eglinton Avenue and Yonge Street is increasingly busy with the addition of thousands of condo units and construction in the area. Office projects have lagged. (Jennifer Roberts/The Globe and Mail)

“Not only is there a lack of new office on Eglinton, nothing’s being built in the midtown market on the Yonge subway from College till you get up to York Mills,” says Shawn Gilligan, market intelligence team leader at Colliers International and co-author of a 2015 report that found office buildings within 400 metres of the Greater Toronto Area’s transit stations have significantly lower vacancy rates and can charge about 20 per cent more on average for the space.

“That report’s still accurate,” Mr. Gilligan says. “The Yonge-Eg submarket is very healthy, with strong anchor tenants and a 2.8-per-cent vacancy rate, four million square feet [of space].” Midtown’s rate is also low, 3.2 per cent, but it’s older space, he says. “Office buildings in the GTA built over the last 10 years are basically downtown, where the vacancy rate is 4 per cent, or out in the 905 [area-code suburbs]; it’s about 50-50.”

Yonge-Eglinton is one of Toronto’s four “urban growth centres” where, according to the city’s official plan, “jobs, housing and services will be concentrated in dynamic mixed-use settings.” Yet despite rapid transit to all four, none has been adding many jobs. (North York Centre, served by two subway lines since 2002, and Scarborough Centre, the destination of a new subway plan, have seen net job losses in recent years.)

The Yonge-Eglinton residential boom preceded the plan for the new east-west LRT, which will run underground through the core and connect to two subway stops (Eglinton and Eglinton West) on the Yonge-University line, which feeds the downtown. The midtown centre had already exceeded its 2031 density target by 20 per cent in 2006.

“There’s craziness, but I completely agree with the wisdom of the [Ontario] Places to Grow Act,” says city councillor Josh Matlow, whose Ward 22 is home to nearly half the Eglinton-focused condo activity and lots of neighbourhood anxiety.

The Eglinton Crosstown LRT runs 19 kilometres, much of it underground through Toronto's core but some of it coming up to street level on the city's peripheries, as the construction from 2016 on Eglinton West shows here. (Fred Lum/The Globe and Mail)

“Intensification is needed to mitigate sprawl and the junction of two rapid transit lines is a place for it. Most of my residents get it and are reasonable, but I think the failure of the act is that there’s nothing in there to ensure necessary infrastructure and social services keep up with the growth.”

And while schools, parks and daycare are the most talked-about amenity concerns, Mr. Matlow’s list includes jobs that would allow many residents to walk to work.

“You don’t want to build a bedroom community in the sky,” he says. “We need more balance; we can’t keep putting more people onto the Yonge subway to go to downtown jobs.”

That’s why he opposed the 90 Eglinton Ave. W. plan to replace just half the office component, saying it creates a dangerous precedent.

There will likely be one big office development, at the southwest corner of Yonge and Eglinton, though applications haven’t been filed. City real estate manager Build Toronto, city planning and Oxford Properties (owned by Ontario Municipal Employees Retirement System) have been holding public consultations regarding that 7.7-acre site. (There are rumours the Toronto Transit Commission, which leases space across the midtown market, intends to consolidate its operations on that corner, but nobody’s talking publicly.)

The new LRT, slated to open in 2021, will connect to the Toronto Transit Commission subway's Line 1 at Eglinton and Eglinton West stations, feeding even more commuters to downtown offices.

Aside from that, planners admit Eglinton will undergo almost exclusively residential development (with ground-floor retail). The corridor has been zoned for eight-storeys as-of-right, though high-rises are allowed at some corners, including at Victoria Park Avenue, where Choice REIT is proposing 2,614 residential units in several towers on an old suburban mall site.

“It’s a struggle trying to get a mix that promotes living and working,” says Jennifer Keesmaat, Toronto’s chief planner and an advocate of pedestrian-focused, mixed-use communities.

“We probably do need to change the lattice of incentive and disincentive, both to direct growth where we want it and to ensure we’re getting the right mix of uses,” she says, adding that shifting from universal development fees to ones that vary by location is an idea to consider.

Pamela Blais, principal at Metropole Consultants and an economic geographer, has been studying “office sprawl” in car-dependent locations. She says “office likes to be near other office and urban amenities, a critical mass capitalizing on agglomeration benefits.

“Given office development patterns of the past 10 or 15 years and the level of demand we guess we have for coming decades, the planning and reality are not well-aligned.”

Dr. Blais, who has a doctorate in urban economic geography from the London School of Economics, says new office space could take off in transit-served centres if firm new growth-plan policies become embedded in local official plans, and as suburban road congestion worsens. But she doesn’t see the centres siphoning off much downtown demand, as some planners have hoped for decades.

“We might not be able to get any subway built downtown, but it’s still where new office wants to be. It remains the best transit-served market, even if it’s crowded. We’re not planning [transit] for where the jobs are and where jobs have a natural tendency to go.”

Either way, Dr. Blais – like Mr. Gilligan and Ms. Keesmaat – points out that while rapid transit is a key amenity for tenants seeking office space, investments in new subway and light rail are nowhere near enough on their own to create the urbanism office developers increasingly demand.

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